The Reserve Bank of India (RBI) has started interacting with the chiefs of various state-owned banks to assess liquidity, credit growth and rate scenario before it announces its Annual Monetray & Credit Policy on April 20 Unlike the pre-policy meet that usually takes place quarterly on the eve of the RBI policy, this meeting happens only once in a year, that too before the announcement of the annual monetary policy by the central bank.
After interacting with a few bankers in past, Gokarn is now likely to meet bankers like Punjab National Bank CMD KR Kamath, Bank of Baroda chief MD Mallya and Allahabad Bank CMD JP Dua.
Though bankers say the liquidity overhang scenario is still there in the system, it is gradually drying up since the hike in cash reserve ratio (CRR), which was implemented by the RBI in January.
In a similar way, credit growth is also taking place across the sectors. But the bankers feel credit offtake is not up to the mark as it was expected. Hence, banks are weighing other options, like commercial papers and investment in mutual funds, in their bid to park their money. In the similar fashion, interest rate is s also likely to harden soon.
Corporation Bank CMD JM Garg said that despite non-performing assets (NPA) in the SME segment at his bank has risen to 3-4%, his bank was still focusing on the sector to achieve its credit growth target for the current fiscal as growth is still sluggish in the retail sector.
?There is plenty of liquidity in the system. Still, year-end demands in credit may absorb the liquidity fast,? said Dua, who is likely to meet RBI on March 19.
However, he hoped that there will be all-round demands of credit during the first quarter of the next fiscal.
Indian Overseas Bank CMD SA Bhat said, ?I doubt if the banks will be able to achieve the target given by RBI.? Still, he believes in the next fiscal, when RBI would be able to control inflation over a period of time, the credit growth would be up at 20%.??
